Publicizing Information and EDGAR - Karolyi Review of Finance

More is Less: Publicizing Information and
Market Feedback*
Andrew Bird Stephen A. Karolyi

Tepper School of Business Tepper School of Business
Carnegie Mellon University Carnegie Mellon University
apmb@andrew.cmu.edu skarolyi@andrew.cmu.edu
Thomas G. Ruchti Phong Truong

Tepper School of Business Smeal College of Business
Carnegie Mellon University Pennsylvania State University
ruchti@andrew.cmu.edu phongtruong@psu.edu
July 8, 2020
Abstract
We study how information acquisition costs affect the informativeness of prices in
guiding firm investment decisions. Using the SEC's staggered rollout of the EDGAR
web platform as a shock to the cost of acquiring public information, we find
that EDGAR reduced investment-Q sensitivity by 35%, despite increasing overall
price efficiency. These findings are robust to tests addressing potential non-random
assignment to adoption waves and treatment effect heterogeneity. Consistent with a
crowding-out channel, any price efficiency gains failed to reveal decision-relevant
information to managers. Our findings cast doubt on whether recent innovations in
information acquisition and processing will improve allocative efficiency.
JEL Classification: G10, G30, M41

Keywords: EDGAR; real effects of financial markets; price efficiency; price
informativeness; information acquisition; SEC regulation; information technology
*
For valuable comments and discussion, we thank John Barrios, Matthias Breuer, Ed deHaan, Alex
Edmans, Elia Ferracuti, Stephan Hollander, Robin Litjens, Harm Schütt, Suhas Sridharan, Sorabh Tomar,
and seminar participants at EIAW and Tilburg University.
Electronic copy available at: https://ssrn.com/abstract=3641837

1 Introduction
Conventionally, price efficiency has been defined as the extent to which the price of a
given security traded in a secondary market accurately predicts the future value of that security.
Bond, Edmans, and Goldstein (2012) term this notion Forecasting Price Efficiency (FPE).
However, as Bond et al. (2012) argue, the informational value of secondary markets for firm
managers may not depend on FPE because priced information may already be partially known to
managers. If so, the value of the secondary market also depends on whether a manager can make
value-maximizing decisions based on information, revealed to her through the price, that she does
not already possess (Hayek 1945; Baumol 1965). Bond et al. (2012) call this feedback effect
Revelatory Price Efficiency (RPE).
Despite the potential importance of RPE, recent regulation and technological innovation
have mainly targeted FPE instead. For example, the passage of RegFD and SOX were a part of
the long-standing mission of the SEC to “level the playing field” and make information equally
accessible to “all investors, whether large institutions or private individuals.” 1 Coincidentally, the
rise of the internet has improved access to information and financial market participation (Wu,
Siegel, and Manion 1999; Bogan 2008). Advancements in fintech have reached capital markets,
making new sources of information broadly available. 2 While these attempts to ease access to
value-relevant information were intended to improve FPE, little is known about their effect on
1
https://www.sec.gov/Article/whatwedo.html.
2
Examples of fintech innovation include nontraditional data and market intelligence (D’Acunto, Prabhala,
and Rossi 2019; Zhu 2019; Cookson and Niessner 2020; Cookson, Engelberg, and Mullins 2020; Grennan
and Michaely 2020a,b) and news aggregators and robo-journalists (Blankespoor, de Haan, and Zhu 2018;
Birru, Gokkaya, and Liu 2019; Coleman, Merkley, and Pacelli 2020). See Goldstein, Jiang, and Karolyi
(2019) for a survey on the implications of fintech in capital markets.

RPE. In this paper, we study how decreasing the cost of acquiring public information impacts the
role of prices in promoting efficient real decisions.
To answer this question, we investigate the implications of the staggered implementation
of EDGAR by the SEC in the 1990s, which significantly reduced public information acquisition
cost by digitizing and centralizing corporate filings, for corporate investment behavior. Following
prior studies (e.g., Chen, Goldstein, and Jiang 2006; Edmans, Jayaraman, and Schneemeier 2017;
Jayaraman and Wu 2019), we use the investment-Q sensitivity framework in which the manager
uses the stock price as a signal of her investment opportunities, and incorporate information
acquisition costs within this framework. Despite tension about the predicted effects of EDGAR
on RPE and intended effects on market efficiency, we document robust evidence of a surprising
finding: investment-Q sensitivity decreases significantly following the introduction of EDGAR.
Theoretically, it is unclear ex ante if EDGAR would even affect the usefulness of prices to
managers. If the stock market is semi-strong form efficient, then reducing the cost of information
that is already public should not impact prices, and thus leave FPE and RPE unaffected. If not,
EDGAR could either increase or decrease market feedback via changes in FPE or RPE. Regarding
the FPE channel, Gao and Huang (2020) show evidence of improved stock price efficiency as a
result of the introduction of EDGAR, consistent with an increase in FPE. The FPE channel
predicts an increase in investment-Q sensitivity since when price efficiency goes up, firms can raise
more capital and better exploit investment opportunities.
Theoretical predictions regarding the RPE channel are more nuanced. On the one hand,
classic theory (e.g., Verrecchia 1982; Diamond 1985) suggests that public disclosure may crowd
out private information when investors view them as substitutes (i.e. both information signals are
about the same underlying variable). Decreasing the cost of acquiring public information may
increase the number of traders who choose to acquire public information instead of private

information, as well as invest more in its precision. This results in prices reflecting more public
information (i.e. information managers already know), rather than private information. Therefore,
even if price efficiency increases in an FPE sense, price still reveals less information to managers
that is relevant to real decisions, resulting in lower investment-Q sensitivity (Gao and Liang 2013,
Bond and Goldstein 2015).
On the other hand, when public and private information are complements in the sense
that making the former more readily available could encourage private information acquisition,
then public disclosure may crowd in private information. For example, Goldstein and Yang (2019)
show that in a setting where there are two information signals about two different underlying
variables, revealing more precise information that the manager already knows causes traders to
acquire and trade more aggressively on information about which she wants to learn. Consequently,
this complementarity between the two sources of information enables the manager to learn more
from price, resulting in higher investment-Q sensitivity.
Hence, whether reducing the cost of acquiring public information improves investment-Q
sensitivity is an empirical question, both in the context of EDGAR and beyond. The EDGAR
setting is ideal for this question because it drastically reduced the cost of acquiring public
information but held fixed the mandated quantity and content of public information already
available. Before EDGAR, investors had limited access to corporate information, which could be
obtained through mailed annual and quarterly reports, national and local news media (Engelberg
and Parsons 2011), or by traveling to one of the few public reference rooms in D.C., New York,
and Chicago (Gao and Huang 2020). To improve information availability, the SEC implemented
the phase-in of EDGAR from 1993-1996, in which it assigned firms to four annual waves of
adoption. This staggered implementation offers useful variation in treatment timing to study how
EDGAR affects investment-Q sensitivity while mitigating potential confounding factors. For a

confounding event to explain our results, it would have to affect different groups of firms at
different points in time in accordance with the EDGAR rollout.
Using a staggered difference-in-differences design, we find that investment-Q sensitivity
fell by 35.2% post-EDGAR. Our main specification includes firm fixed effects to capture within
firm variation, year fixed effects to capture time trends, and firm controls to ensure that the
changes we pick up are not driven by firm performance, capital structure, market capitalization,
or age. The reduction in investment-Q sensitivity supports the crowding-out channel of RPE, in
which less costly access to information the manager already knows dissuades the impounding into
the price information that she wishes to learn. Furthermore, we find a reduction in investment-Q
sensitivity even though the sensitivity of investment to cash flows decreases post-EDGAR, which
indicates that firms rely less on internal financing for investment decisions. This is consistent with
the notion that investment-Q sensitivity falls because firms learn less from prices when they
contain less useful information to them, and is not consistent with increased market frictions
leading firms to be less responsive to investment opportunities in general.
One potential concern could be that assignment to EDGAR waves was not fully
randomized. Gao and Huang (2020) speculate that the SEC might have considered firm size in
the process (e.g. larger firms might have been selected to join EDGAR first). Therefore, we
augment our baseline regression with firm size interacted with the post-EDGAR indicator as a
dynamic control around the adoption, and find our estimates remain quantitatively similar. To
further mitigate concerns about potential selection into treatment, we perform a dynamic test of
parallel trends. Our evidence suggests that there are no statistically significant pre-trends in
investment-Q sensitivity, indicating that the parallel trends assumption is not violated.
Another potential concern is that our estimates could be biased if there are heterogeneous
treatment effects across the four EDGAR waves (Borusyak and Jaravel 2017; Goodman-Bacon

2018; Sun and Abraham 2020). We address this issue in two ways. First, we directly test whether
the treatment effects are different across the four waves (1993, 1994, 1995, and 1996). We fail to
reject the null hypothesis that these treatment effects are the same, suggesting that treatment
effect heterogeneity is unlikely to bias our estimates. However, we also pursue a second test
involving a novel application of inverse probability weights to a setting with variation in treatment
timing. Specifically, we augment our baseline regression with a weighting scheme based on the
predicted probabilities to be assigned to a particular EDGAR wave from a multinomial logistic
regression and find that our estimates are quantitatively similar to those of our main specification.
We also conduct several additional tests to assess the robustness of our findings. Overall,
we find consistent results using alternative event windows, dropping the small fraction of firms
that did not join EDGAR by the end of the adoption period, and to alternative measures of
investment. We also find consistent results dropping observations after 1997 to ensure that our
effects are not driven by the reduction in investment-Q sensitivity among multi-segment firms
following the adoption of SFAS 131 around 1998, as documented in Jayaraman and Wu (2019).
To pin down the crowding out effect of the RPE channel and its economic mechanisms,
we perform four additional sets of tests. First, notwithstanding the evidence in Gao and Huang
(2020), FPE might have decreased following EDGAR, resulting in lower investment-Q sensitivity.
We show, however, that our results are quantitatively robust to controlling for two different
measures of market quality used in prior work as proxies for FPE – probability of informed trading
(PIN; Easley, Kiefer, and O'Hara 1997) and price non-synchronicity – and their interactions with
the post-EDGAR indicator (Chen, Goldstein, and Jiang 2006).
Second, we predict that the crowding out effect of public information would be stronger
when it is easier for such information to be impounded into prices via trading. Consistent with
this prediction, we show that our findings are driven by stocks with a low level of pre-EDGAR

trading costs, measured with Amihud (2002) illiquidity, trading volume, and bid-ask spreads. This
indicates that market liquidity is also important for publicly available information to be better
incorporated into prices.
Third, we posit that information that managers already possess is likely idiosyncratic
information about their own firms, while information that they wish to learn is likely systematic
information. The more idiosyncratic a firm, the less the manager will rely on price to guide her
investment decisions. Thus, we differentiate between “systematic” firms and “idiosyncratic” firms
and expect the decrease in investment-Q sensitivity post-EDGAR to be more pronounced for the
former. Consistent with this prediction, we find that our effects are larger for firms in high beta
industries, indicating that firms that are more dependent on knowing total market outcomes are
more affected by EDGAR. We also find larger effects for firms in low Herfindahl-Hirschman Index
industries, where low concentration implies that firms are more dependent on industry
characteristics and trends. Moreover, the older the firm, the less likely it is to see reduced
investment-Q sensitivity following EDGAR adoption. This is consistent with older firms finding
a niche over time, depending on a more idiosyncratic technology or business model.
Finally, Gao and Huang (2020) show that EDGAR adoption leads to greater information
production activities from equity analysts. We find that the reduction in investment-Q sensitivity
is greater for firms with greater pre-EDGAR analyst coverage. In other words, the additional
information analysts produce post-EDGAR appears to be due to idiosyncratic information
processing based on firms’ own filings, thereby amplifying the negative effect of EDGAR on RPE.
Our findings contribute new insights into the importance of information acquisition costs
to the literature on the real effects of financial markets (Bond et al. 2012). In particular, we
provide evidence from a unique setting – the introduction of the EDGAR web platform – in which
RPE can not only be disentangled from FPE (Dow and Gorton 1997; Bond, Goldstein, and

Prescott 2010; Bond and Goldstein 2015), but actually decreases despite a simultaneous increase
in FPE. Empirically, our evidence complements prior work that studies market feedback
mechanisms in the cross-section of firms, based on characteristics like equity dependence (Baker,
Stein, and Wurgler 2003), privately-informed trading (Chen, Goldstein, and Jiang 2007), dual-
listing status (Foucault and Fresard 2014), and market price (Edmans, Goldstein, and Jiang 2012).
More recently, studies have branched out to study policies that may affect FPE and RPE,
including cross-country insider trading laws (Edmans, Jayaraman, and Schneemeier 2017),
accounting standards (Jayaraman and Wu 2019), and innovations that may have similar effects,
like the introduction of alternative data (Zhu 2019). Like Edmans et al. (2017), we study the
effects of a policy intended to level the playing field for investors. However, whereas Edmans et
al. (2017) focuses on cross-country insider trading laws that likely reduce trading with private
information by increasing the expected punishment of exploiting insider information, our paper
studies the staggered adoption of EDGAR that differentially publicizes public information for
firms operating in the same institutional environment. From an ex ante perspective, EDGAR
could have theoretically increased the use of private information (Goldstein and Yang 2019) or
reduced it (Gao and Liang 2013, Bond and Goldstein 2015). Our evidence therefore corroborates
the findings in Edmans et al. (2017) concerning revelatory price efficiency, and demonstrates that
RPE operates through a new channel (i.e., the cost of acquiring public information). This new
channel is especially important for policymakers and practitioners because it is likely to generalize
to IT-based innovation and policy in capital markets.
An important contribution of our paper is to provide well-identified evidence of the effect
of information acquisition costs by exploiting a quasi-natural experiment that generates variation
in treatment timing within a single institutional environment. Specifically, because we analyze the
staggered adoption of a policy within a market, we hold fixed the institutional environment and

policymaker objectives while varying treatment timing. Moreover, in our setting, variation in
treatment timing is determined in advance by one regulator rather than dynamically selected
across regulators. This policy-based treatment timing is therefore especially useful for causal
inference because it isolates outcomes from strategic implementation and mitigates concerns about
individual confounding events. Moreover, in contrast to recent work, we focus on variation in
information acquisition costs rather than the quantity of such information. Indeed, our design
holds fixed the mandated content and quantity of disclosures. Our findings therefore call for more
work on understanding the implications of investor behavior when investors must choose both
total attention and the allocation of that attention across multiple information sources.
Our findings are also tightly linked to the prior literature on the effects of SEC reporting
technological innovation (Blankespoor, deHaan, and Marinovic 2020). Most recently, Gao and
Huang (2020) provide evidence that the introduction of EDGAR increases the amount and
forecasting predictability of retail investor trading, increases analyst forecast accuracy, and
generally increases market efficiency. Earlier, Qi, Wu, and Haw (2000) and Asthana and Balsam
(2004) provide evidence of increased information content of 10-K filings and smaller trade sizes
following EDGAR. Together, these papers provide evidence that EDGAR increases FPE, which
indicates that our finding that EDGAR reducing RPE is robust because they go in the opposite
direction of what would be predicted by the change in FPE. Our paper is also related to a new
working paper, Goldstein, Yang, and Zuo (2020), which focuses on the effects of EDGAR on
corporate investment rates and performance. Our findings are complementary in that we provide
well-identified evidence that EDGAR reduces revelatory price efficiency, which is a channel
through which EDGAR affects real efficiency (Bond, Edmans, and Goldstein 2012). Whereas
EDGAR-driven increases in FPE, as documented in Gao and Huang (2020), predicts that EDGAR
adoption should also increase investment levels, predictions about RPE and investment efficiency

are theoretically distinct. We make additional inroads in identification by proposing a new
application of inverse probability weighting to a setting with variation in treatment timing and
potential non-random assignment to treatment waves. Finally, we contribute new tests to the
market feedback literature to help distinguish the economic mechanisms underlying RPE, and we
find evidence that EDGAR has the strongest effects on firms for which price is likely to reveal
systematic information that the manager would like to learn.
Recent work has also studied the effects of the SEC mandate of machine-readable financial
statement data, or XBRL, but has found mixed evidence on the effects of XBRL on trading
efficiency and liquidity (Blankespoor, Miller, and White 2014; Bhattacharya, Cho, and Kim 2018).
To these papers, we provide new evidence on the effects of EDGAR on corporate investment
behavior, namely on the extent to which managers learn from price following a reduction in the
cost of acquiring public information. Our findings provide new evidence of a setting in which
EDGAR both increases FPE and decreases RPE, driving an empirical wedge between the two
theoretically distinct constructs.
2 EDGAR Implementation and Data
2.1 EDGAR Implementation
Until the early 1990s, investors had limited access to annual and quarterly reports. While
it was possible for investors to receive mailed reports from firms, the only publicly available access
to comprehensive firm filings was in one of three reference rooms in Washington D.C., New York
City, and Chicago, where filings could be read (Gao and Huang 2020). To better deliver
information to the public, the Securities and Exchange Commission began planning a shift to
electronic filings with a special focus on annual reports in the early 1980s and developed the

“EDGAR Pilot” in 1983. The first pilot program filings were received on September 24, 1984, and
the pilot program eventually received 116,000 electronic filings through the end of the pilot
program on July 14, 1992 (Budge 1993). 3
The pilot was deemed successful and, on February 23, 1993, after a decade of planning,
the Securities and Exchange Commission issued four releases concerning the mandate for electronic
filing via the Electronic Data Gathering, Analysis, and Retrieval system, otherwise known as
EDGAR. 4 The releases contained phase-in schedules to bring registrants onto the EDGAR system,
beginning April 26, 1993. The phase-in schedule was organized into four annual waves, with 12
subwaves, the first of which contained the small number of “transitional filers” made up of the
latest members of the EDGAR Pilot. Additionally, after the initial wave of registrants completed
electronic filing in 1993, a positive evaluation of the platform’s performance led to the scheduling
of three additional wave-years, 1994–1996. 5
Wave assignments were conducted by the SEC, but firms could request hardship
exemptions, subject to SEC approval. These exemptions include (i) unanticipated technical
problems with submitting electronic documents (e.g., problems with computer equipment, a storm
that interrupts power)—although this delayed electronic filing by only six days; (ii) technical
problems beyond the filer’s control—again resulting in only temporary delay; 6 and (iii) a
continuing hardship exemption for filings of a company that is under bankruptcy protection or
3
For context, this number of filings, over roughly eight years, constitutes a fraction of the number of filings
typically found on EDGAR for a single year.
4
The SEC provides access to EDGAR filings via direct subscription and the EDGAR public database on
sec.gov. This system makes searchable all public filings while also making directory browsing available using
registrant-specific CIK numerical identifiers, assigned to filers when they sign up to submit filings to the
SEC (https://www.sec.gov/edgar/searchedgar/accessing-edgar-data.htm).
5
See https://www.sec.gov/info/edgar/regoverview.htm.
6
Similar exemptions to these first two exist to this day
(https://www.sec.gov/info/edgar/regoverview.htm).
10

when conversion of contracts of an acquired company proves an undue hardship to the acquirer. 7
Consistent with these exemptions being exercised infrequently, Gao and Huang (2020) report that
only 3% of registrants failed to comply with the initially disclosed wave of assignments, supporting
the use of the EDGAR rollout as a quasi-natural experiment. Using data on the realized adoption
of EDGAR, we find that the noncompliance rate is even lower when one takes into account
potential hardship exemptions.
2.2 Data and Sample Selection
We obtain information on when firms first join EDGAR by manually collecting corporate
filings for all firms in the EDGAR universe. As discussed in the previous section, the SEC’s
EDGAR mandate focused on annual reports. Therefore, we use the first form 10-K available on
EDGAR to identify the first fiscal year a firm is on EDGAR. 8 The first fiscal year on EDGAR for
these firms is defined as the closest fiscal year end before the filing date of the first filing in
question.
Next, we retain only firms that appear on Compustat (annual) and CRSP. Specifically,
we require that firms have common stock traded in major U.S. stock exchanges such as NYSE,
NASDAQ, and AMEX. We then retain firm-year observations in between 1989 and 2000 so that
we have at least four years before and four years after the adoption of EDGAR, irrespective of
the wave assignment. Finally, following Gao and Huang (2020), we exclude firms that have an
IPO in 1993 or after. This is to ensure that the effect of EDGAR will not be contaminated by the
IPO effect. For example, firms may have strategically selected to go public during or after the
7
See https://www.sec.gov/news/speech/1993/062993budge.pdf.
8
For firms whose form 10-Ks are not available, we use the first filing of any kind. Our findings are robust
to excluding these firms.
11

implementation of EDGAR for endogenous reasons. Further, prices of firms that just go public
are likely more informative due to heightened market interest in the first few years, and these
firms may also be more responsive to investment opportunities given their newly raised capital.
Following prior literature in investment-Q sensitivity (e.g., Chen, Goldstein and Jiang 2006, Stein
and Wurgler 2003, Foucault and Frésard 2012), we exclude firms whose market value of common
equity is less than $10 million.
The baseline sample consists of 33,038 firm-year observations over a twelve-year period
from 1989 to 2000. Figure 1 illustrates the realized rollout of EDGAR over the four different waves
in 1993, 1994, 1995, and 1996. The y-axis shows the cumulative percentage of firms on EDGAR.
The figure shows that roughly 30 percent of firms join EDGAR in 1993, an additional of 22 percent
in 1994, 28 percent in 1995 and 27 percent in 1996. Gao and Huang (2020) compare the initial
schedule of phase-in waves to realized filings and report that 3% of firms did not comply with
their initial EDGAR wave assignments. This definition of noncompliance includes strict
noncompliance with the policy, but it also includes (i) firms that requested and received SEC
approval for policy-approved hardship exemptions, and (ii) the schedule revision that occurred
after a test period evaluation. We therefore focus on the realized phase-in of EDGAR, taking into
account the hardship exemptions and scheduling revisions approved and designed by the SEC.
Based on this realized phase-in schedule, which implies a stricter definition of noncompliance in
which firms do not adopt electronic filings until after the phase-in completes in 1996, we find a
smaller fraction of noncompliers. In our sample, the fraction of non-adopters gradually decreases
to zero after 1997.
We use firm fundamental data from Compustat to calculate future investment, Tobin’s Q,
and various firm characteristics. We use CRSP to obtain stock prices and trading data. Other
sources of data used for additional analyses and cross-sectional tests are probability of informed
12

trading (PIN; Easley, Kiefer, and O'Hara 1997) obtained from Brown, Hillegeist, and Lo (2004),
analyst data from I/B/E/S, and monthly industry returns from Kenneth French’s website.
Detailed variable descriptions are available in Appendix A.
Table 1 reports summary statistics for variables used in regressions. The mean (median)
of future investment divided by total fixed assets is 31.5% (21.1%). The mean and median of Q
is 1.764 and 1.327, respectively. The standard deviation of future investment is 36.3%, while the
standard deviation of Q is 1.3. These values are similar to those reported in recent studies (e.g.
Foucault and Frésard 2014; Jayaraman and Wu 2019).
3 Empirical Strategy and Results
3.1 Baseline Specification and Results
To test the effect of EDGAR adoption on investment-Q sensitivity, we use a staggered
difference-in-differences design that compares changes in investment-Q sensitivity before and after
a firm joins EDGAR. While all firms are eventually treated (i.e. required to have their corporate
filings on EDGAR), this research design allows us to have an implicit control group of firms in
which firms joining EDGAR late serve as control firms for those that join EDGAR early. The
staggered implementation of EDGAR also helps mitigate concerns that any one confounding event
might be driving our results since such an event would have to be correlated with the rollout of
EDGAR in which different groups of firms were phased in at different points in time.
Our main specification is a firm-level regression in which we augment the standard
investment-Q regression at the annual level with interactions for whether a firm is on EDGAR,
as in equation (1):
𝐼𝐼𝐼𝐼𝐼𝐼𝑖𝑖,𝑡𝑡+1 = 𝛽𝛽0 + 𝛽𝛽1 𝑄𝑄𝑖𝑖,𝑡𝑡 × 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑖𝑖,𝑡𝑡 + 𝛽𝛽2 𝑄𝑄𝑖𝑖,𝑡𝑡 + 𝛽𝛽3 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑖𝑖,𝑡𝑡 + 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑖𝑖,𝑡𝑡 + 𝑣𝑣𝑖𝑖 + 𝑢𝑢𝑡𝑡 + ε𝑖𝑖,𝑡𝑡 (1),
13

where Invi,t+1 is future investment, defined as capital expenditures of firm i as of year t+1, scaled
by fixed assets as of year t; Qi,t is Tobin’s Q, defined as the ratio of market value of assets (market
value of equity plus book value of debt) measured using firm i’s stock price at the end of fiscal
year t, divided by book value of assets; Controlsi,t is a vector of control variables capturing firm
fundamentals such as FirmAgei,t (firm i’s age in years as of year t), Sizei,t (the natural log of one
plus firm i’s market capitalization as of year t), BMi,t (firm i’s book-to-market ratio as of year t),
Leveragei,t (firm i’s leverage ratio as of year t), and ROAi,t (firm i’s return on assets as of year t);
vi represents firm fixed effects to capture time invariant heterogeneity across firms; ut denotes year
fixed effects to control for general time trends in investment-Q sensitivity. All variables are defined
in Appendix A. In some specifications, we replace ut with uindustry×t to control for industry-specific
trends where industry is defined using four digit SIC codes. Standard errors are clustered at the
firm level, to allow for potential correlation of the error terms of observations from the same firm.
Posti,t is an indicator equal to one starting from the first year Qi,t is affected by firm i’s
EDGAR adoption (i.e. the event year of firm i), and zero otherwise. Note that the event year of
firm i is not the first fiscal year in which firm i’s first 10-K is filed on EDGAR, but rather, the
next fiscal year. To see why, consider a firm with a December 31 fiscal year end. Suppose that
the firm’s first 10-K on EDGAR was for the fiscal year ending December 31, 1995 and was filed
on March 25, 1996. It is clear that while the first fiscal year on EDGAR for the firm is 1995, the
effect of EDGAR on price feedback occurs during 1996. Thus, the first Q measured using year
end price that is affected by EDGAR for this firm is the one in 1996, instead of 1995. In other
words, for this hypothetical firm, the Posti,t variable turns on starting from 1996.
The coefficient of interest in our baseline regression is 𝛽𝛽1 of the interaction term. If the
market is semi-strong form efficient, the reduction in the cost of acquiring public information due
to EDGAR should not have any significant impact on price informativeness, and therefore would
14

leave both FPE and RPE unaffected. In other words, 𝛽𝛽1 is expected to be insignificantly different
from zero. However, if the semi-strong form of market efficiency does not hold, then the sign of
𝛽𝛽1 depends on how EDGAR affects FPE and RPE. Since Gao and Huang (2020) show evidence
suggesting that FPE increases following EDGAR, it follows that firms are likely able to raise more
capital due to reduced information asymmetry. Consequently, the FPE channel suggests that
EDGAR may facilitate efficient investments, leading to increased investment-Q sensitivity. The
RPE channel, however, provides more nuanced predictions about 𝛽𝛽1 , depending on whether the
more readily available public information on EDGAR crowds out or crowds in the production of
information managers wish to learn from prices. If the crowding-in channel dominates (e.g., due
to the complementarity between the information managers already know and the information they
wish to learn), then we would expect managers to learn more from prices, meaning 𝛽𝛽1 would be
positive. If the crowding-out channel dominates (e.g., when investors view public information as
a substitute to private information), then prices will reflect information that managers already
know more than information they wish to learn. In this case, we expect to see managers relying
less on prices to guide their investment decisions, which implies that 𝛽𝛽1 would be negative.
The results from estimating equation (1) are reported in Table 2. Across all specifications,
the coefficient on the interaction term is negative and statistically significant. This is consistent
with the prediction of the RPE channel in which the crowding-out channel dominates. Managers
are already privy to the information contained in public corporate filings. Our results are
consistent with improved access to public filings leading prices to reflect that information more
than information that would otherwise be useful to managers. The economic magnitude of the
reduction is also significant. Our preferred specification in column (4) indicates that the
implementation of EDGAR leads to a reduction in investment-Q sensitivity by roughly 36.7%.
15

While the results in Table 2 are supportive of the crowding-out channel, one alternative
explanation could be that the results are driven by a general trend in which firms become less
responsive to investment opportunities following EDGAR adoption. To address this concern, we
extend our baseline regression to include CFOi,t (cash flow from operations of firm i in year t,
defined as earnings before extraordinary items plus depreciation and amortization scaled by total
assets), as well as its interaction with Posti,t, as shown in equation (2):
𝐼𝐼𝐼𝐼𝐼𝐼𝑖𝑖,𝑡𝑡+1 = 𝛽𝛽0 + 𝛽𝛽1 𝑄𝑄𝑖𝑖,𝑡𝑡 × 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑖𝑖,𝑡𝑡 + 𝛽𝛽2 𝑄𝑄𝑖𝑖,𝑡𝑡 +𝛽𝛽3 𝐶𝐶𝐶𝐶𝐶𝐶𝑖𝑖,𝑡𝑡 × 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑖𝑖,𝑡𝑡 + 𝛽𝛽4 𝐶𝐶𝐶𝐶𝐶𝐶𝑖𝑖,𝑡𝑡 + 𝛽𝛽5 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑖𝑖,𝑡𝑡
+ 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑖𝑖,𝑡𝑡 + 𝑣𝑣𝑖𝑖 + 𝑢𝑢𝑡𝑡 + ε𝑖𝑖,𝑡𝑡 (2).
If it is indeed the case that EDGAR increases market frictions, leading to reduced capital flows
to firms, then we would expect firms to rely more on internal cash flows to make investment
decisions. In other words, this would predict that 𝛽𝛽3 would be positive, while the magnitude of 𝛽𝛽1
would be attenuated. However, if EDGAR decreases market frictions and increases capital flows,
then we would expect firms to rely less on internal financing, being able to raise external capital
to make investment decisions. This would predict that 𝛽𝛽3 would be negative, while the magnitude
of 𝛽𝛽1 would not be attenuated.
Table 3 presents the results estimating regression equation (2). The coefficient on CFO ×
Post is negative and statistically significant. Furthermore, the coefficient on Post is positive and
significant. This indicates that EDGAR indeed decreases market frictions, allowing firms to raise
external capital more easily while relying less on internal financing to make investment decisions.
This is consistent with Gao and Huang (2020), who find that overall price efficiency increases
following EDGAR. More importantly, despite a reduction in market friction, the coefficient on Q
× Post is still negative and statistically significant across all specifications. The economic
magnitude of the effect is also similar to that in Table 2. This suggests that the reduction in
investment-Q sensitivity is not due to a general trend in which firms become less responsive to
16

available investment opportunities. Altogether, Table 3 provides evidence consistent with the
notion that RPE decreases, even though FPE increases.
An identifying assumption of the staggered difference in differences design is that
treatment is randomly assigned. Gao and Huang (2020) speculate that the SEC might have
assigned firms non-randomly to their respectively EDGAR waves based on size (e.g., larger firms
with better technological capacity might have been selected to join EDGAR first). To account for
potential non-random assignment along this dimension, we control for size effects by augmenting
equation (2) with 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑖𝑖,𝑡𝑡 × 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑖𝑖,𝑡𝑡 as follows:
𝐼𝐼𝐼𝐼𝐼𝐼𝑖𝑖,𝑡𝑡+1 = 𝛽𝛽0 + 𝛽𝛽1 𝑄𝑄𝑖𝑖,𝑡𝑡 × 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑖𝑖,𝑡𝑡 + 𝛽𝛽2 𝑄𝑄𝑖𝑖,𝑡𝑡 +𝛽𝛽3 𝐶𝐶𝐶𝐶𝐶𝐶𝑖𝑖,𝑡𝑡 × 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑖𝑖,𝑡𝑡 + 𝛽𝛽4 𝐶𝐶𝐶𝐶𝐶𝐶𝑖𝑖,𝑡𝑡
+𝛽𝛽5 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑖𝑖,𝑡𝑡 × 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑖𝑖,𝑡𝑡 + 𝛽𝛽6 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑖𝑖,𝑡𝑡 + 𝛽𝛽7 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑖𝑖,𝑡𝑡 + 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑖𝑖,𝑡𝑡 + 𝑣𝑣𝑖𝑖 + 𝑢𝑢𝑡𝑡 + ε𝑖𝑖,𝑡𝑡 (3).
If the size effect is not the main driver of the result, then we would still expect 𝛽𝛽1 to be negative
and statistically significant with comparable economic magnitude.
The results from estimating equation (3) are shown in Table 4. The coefficient on Q ×
Post remains negative and statistically significant even after controlling for size effects. In terms
of the economic magnitude, the estimate from column (4) suggests that EDGAR decreases
investment-Q sensitivity by approximately 35.2%, similar to those reported in the previous two
tables. 9 This indicates that potential selection to specific EDGAR waves based on firm size do not
affect the results.
9
This calculation is based on the incremental change in Investment-Q sensitivity following EDGAR
adoption. This this incremental change corresponds to the ratio of the coefficient on Q × Post to the
coefficient on Post. In the referenced specification, these estimates are -0.0326 (Q × Post) and 0.0927 (Post),
respectively.
17

3.2 Robustness
In this subsection, we conduct a series of robustness tests to support our inferences. Table
5 presents the results of these tests. Columns (1) – (4) show regression estimates using the
specification from column (4) of Table 4, but now with varying event windows, ranging from one
year before and after the event year to four years before and after the event year. The main
coefficient of interest is still negative and statistically significant across all four event windows,
indicating that our main findings are not driven by changes to investment-Q sensitivity far away
from the EDGAR implementation (Borusyak and Jaravel 2017).
Jayaraman and Wu (2019) find that the mandatory segment reporting requirements
(SFAS 131) in 1998 decreases investment-Q sensitivity of affected multi-segment firms. While a
contemporaneous event would theoretically have to be correlated with the EDGAR phase in
schedule to be a threat to identification, we nonetheless estimate our regression model while
retaining only observations from fiscal years prior to 1998 to ensure that our findings are not
influenced by the passage of SFAS 131. As shown in column (5) of Table 5, the coefficient on Q
× Post is still negative and statistically significant, despite the sample restriction.
In column (6), we repeat the analysis while dropping firms that did not join EDGAR by
the end of the adoption period in 1996. The EDGAR effect on investment-Q sensitivity remains
negative and significant with similar economic magnitudes as those reported in the previous tables.
This suggests that the results are not driven by a small subset of firms that continued to submit
paper filings.
Finally, we repeat the analysis in Table 4, now using alternative definitions of investment.
Table 6 presents the results. Panel A shows the regression estimates in which investment is scaled
by total assets instead of fixed assets. In Panel B, however, investment is defined as capital
expenditure plus research and development expense (instead of just the former), scaled by fixed
18

assets. In both panels, we find significant and robust evidence of a reduction in investment-Q
sensitivity. Therefore, the results indicate that our main findings are not sensitive to alternative
measures of investment.
3.3 Parallel Trends Assumption
An important identifying assumption of a difference in differences design is the parallel
trends assumption: in the absence of treatment, treated firms and control firms move in parallel.
A violation of this assumption suggests that there may be anticipation effects or selection into
treatment, meaning the post-treatment outcomes for the control group may not be an appropriate
counterfactual for the post-treatment outcomes for the treated group. Fortunately, the staggered
nature of EDGAR adoption allows for a direct test to assess the parallel trends assumption.
Decomposing the Posti,t variable into a series of time indicators, we estimate the following
dynamic treatment effect regression equation:

5 5
𝐼𝐼𝐼𝐼𝐼𝐼𝑖𝑖,𝑡𝑡+1 = 𝛼𝛼0 + � 𝛽𝛽𝑠𝑠 �𝑄𝑄𝑖𝑖,𝑡𝑡 × I�𝑡𝑡 − 𝐸𝐸𝐸𝐸𝐸𝐸𝑛𝑛𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑖𝑖,𝑡𝑡 = 𝑠𝑠�� + � 𝛾𝛾𝑠𝑠 I�𝑡𝑡 − 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑖𝑖,𝑡𝑡 = 𝑠𝑠�
𝑠𝑠 = −5 𝑠𝑠 = −5
+ 𝛼𝛼1 𝑄𝑄𝑖𝑖,𝑡𝑡 + 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑖𝑖,𝑡𝑡 + 𝑣𝑣𝑖𝑖 + 𝑢𝑢𝑡𝑡 + ε𝑖𝑖,𝑡𝑡 (4),
where s represents the number of years relative to the event year of firm i. 𝛽𝛽−1 is normalized to
0 as a benchmark. The coefficients of interest are the 𝛽𝛽𝑠𝑠 ’s. These coefficients show the dynamic
effect of EDGAR over time. The parallel trends assumption likely holds if 𝛽𝛽𝑠𝑠 = 0 for all s < 0,
which indicates that treatment assignment is as good as random and that there are no anticipatory
effects. That is, treatment assignment was not influenced by any particular characteristics or pre-
trends of the treated firms and control firms.
Figure 2 offers a graphical representation of this test. The x-axis shows the year relative
to the event year of a firm. The y-axis shows investment-Q sensitivity levels (i.e. the coefficient
19

estimates of the 𝛽𝛽𝑠𝑠 ’s). The figure indicates that there are no pre-trends, suggesting that the parallel
trends assumption is not violated. The post-event effect fluctuates around 35%, which is consistent
with the economic magnitude of the EDGAR effect on investment-Q sensitivity reported in the
previous sections. Importantly, since the coefficient estimates following the event year are
relatively stable even after 5 years, the introduction of EDGAR appears to have a persistent
negative effect on managerial ability to learn useful information from price.
3.4 Treatment Wave Heterogeneity and Inverse Probability Weighting
While the results in the previous sections are similar across a variety of robustness tests,
the coefficient on Post might still be subject to potential bias due to heterogeneity in treatment
effects across adoption waves. Recent papers have shown that the average treatment effect
estimated from a staggered difference and differences regression might not free of bias if the
treatment effect varies across cohorts of entities who receive treatment, or if the treatment effect
varies over time (Borusyak and Jaravel 2017; Abaham and Sun 2019; Goodman-Bacon 2018). In
this subsection, we address this issue in two ways. First, we directly investigate whether there are
signs of treatment effect heterogeneity across EDGAR waves. Second, we propose a novel
application of inverse probability weighting using multinomial logistic regression to address
potential non-random assignment of firms to adoption waves that might have led to heterogeneity
in the treatment effects of EDGAR.
To examine whether the treatment effect varies across four waves of the EDGAR rollout,
we modify equation (3) of our baseline model to replace the variable Post with four indicators
corresponding to four different EDGAR waves: Post1993 Wave, Post1994 Wave, Post1995 Wave, and Post1996
Wave
. Specifically, for a given firm, Post1993 Wave is an indicator equal to 1 starting in 1993 if firm i
20

joins EDGAR in 1993, and 0 otherwise. 10 Post1994 Wave, Post1995 Wave, and Post1996 Wave are defined
similarly. The modified regression is stated as follows:
𝐼𝐼𝐼𝐼𝐼𝐼𝑖𝑖,𝑡𝑡+1 = 𝛽𝛽0 + � 𝛽𝛽𝑤𝑤 �𝑄𝑄𝑖𝑖,𝑡𝑡 × 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑤𝑤

𝑖𝑖,𝑡𝑡
𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊
� + 𝛽𝛽1 𝑄𝑄𝑖𝑖,𝑡𝑡 + � 𝛾𝛾𝑤𝑤 �𝐶𝐶𝐶𝐶𝐶𝐶𝑖𝑖,𝑡𝑡 × 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑤𝑤
𝑖𝑖,𝑡𝑡
� + 𝛽𝛽2 𝐶𝐶𝐶𝐶𝐶𝐶𝑖𝑖,𝑡𝑡
𝑤𝑤 𝑤𝑤
+ � 𝛿𝛿𝑤𝑤 �𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑖𝑖,𝑡𝑡 × 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑤𝑤

𝑖𝑖,𝑡𝑡
� + 𝛽𝛽3 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑖𝑖,𝑡𝑡 + � 𝜌𝜌𝑤𝑤 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑤𝑤
𝑖𝑖,𝑡𝑡
+ 𝐶𝐶𝐶𝐶𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑖𝑖,𝑡𝑡
𝑤𝑤 𝑤𝑤
+ 𝑣𝑣𝑖𝑖 + 𝑢𝑢𝑡𝑡 + ε𝑖𝑖,𝑡𝑡 (5),
where w ∈ {1993, 1994, 1995, 1996}. The coefficients of interest are 𝛽𝛽1993 , 𝛽𝛽1994 , 𝛽𝛽1995 , and 𝛽𝛽1996 .
Individually, we expect these coefficients to be negative, consistent with the notion that EDGAR
reduces investment-Q sensitivity. A joint test hypothesis under the null of “H0: 𝛽𝛽1993 = 𝛽𝛽1994 =
𝛽𝛽1995 = 𝛽𝛽1996 ” speaks to whether there is heterogeneity in the treatment effects across four
EDGAR waves.
The results are reported in Panel A of Table 7 and also graphically in Figure 3. Across all
specifications, the coefficients on the four interaction terms corresponding to four EDGAR waves
are negative, consistent with our expectation. In terms of the economic magnitude, these
coefficients appear to be in the same range. Most are individually statistically significant at the
5% level. In fact, the p-value for the F-stat under the null hypothesis “H0: 𝛽𝛽1993 = 𝛽𝛽1994 = 𝛽𝛽1995 =
𝛽𝛽1996 ” is greater than 0.1 in all cases, except for the first column in which controls and firm fixed
effects are not included. In sum, we fail to reject the null hypothesis that treatment effects are
homogenous across EDGAR adoption waves.
Although the findings above offer greater confidence that our main estimates are unlikely
to be affected by heterogeneous treatment effects, a related concern is bias from selection into
10
Note that 1993 refers to the fiscal year of the first 10-K the firm files on EDGAR. The notation of the
superscript is chosen to be consistent with the actual EDGAR implementation period. The event year of
this firm, as discussed in detail in section 3.1, is 1994.
21

adoption waves. We address this issue with inverse probability weighting using a multinomial
logistic regression. The purpose of the traditional inverse probability weighting is to remove
confounding factors by creating a pseudo-sample where treatment is orthogonal to unit
characteristics (e.g., Hirano and Imbens 2001). This is done by assigning higher weights to control
units that are likely to receive treatment (but did not ex post, hence they are control units) and
treated units that are unlikely to receive the treatment (but did ex post, hence they are treated
units). Thus, the weighting scheme places emphasis on control units that are the most similar to
treated units and vice versa. The weights are based on the inverse probability of being treated,
typically estimated using a logistic model in which the dependent variable captures the treatment
status and the independent variables are observable unit characteristic predictors. In other words,
the weighting scheme maximizes overlap in the probability of being treated across treated and
control units, making the synthetic treated and control groups similar to one another, thereby
removing confounding effects.
In the EDGAR setting, the assignment to treatment occurs at the wave level. Thus, since
there are four EDGAR waves, the first step in this approach is to estimate the probability of
being assigned to a particular wave. We posit that the SEC might have used observable
characteristics of firms to assign treatment status in 1992. Hence, we estimate a multinomial
logistic regression to predict the EDGAR wave (1993, 1994, 1995, or 1996) to which a firm is most
likely assigned based on its characteristics in 1992, such as Tobin’s Q, Size, BM, ROA, BM and
FirmAge. Table B1 of Appendix B presents the estimates from the multinomial logistic regression.
The results suggest that the model predicts treatment assignments relatively well (pseudo-R2 =
21%) and that firm size seems to be the most relevant predictor. We then obtain the predicted
probability to be assigned to a particular EDGAR wave from the regression model.
22

Next, we calculate the probability of being treated as of fiscal year t for a given firm i
(𝑝𝑝𝑖𝑖,𝑡𝑡
𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡
) as the cumulative probability of being assigned to an EDGAR wave up to year t. For
example, the probability of firm i being a treated firm in the year of 1995 is equal to the sum of
the probabilities of firm i being assigned to the 1993 wave, 1994 wave, and 1995 wave. Figure 4
shows a visualization of the overlap in treatment probabilities across treated and control firms
over time. 11 The density of the probability of being treated for treated firms gradually shifts to
the right as we move from 1993 to 1995, which means that the average probability of being treated
increases as rollout happens. The figures suggests that there is significant overlap in the treatment
probabilities across treated and control firms, but our simple prediction model partially
distinguishes between the two types of firms.
With the probability of being treated in year 𝑡𝑡 calculated, we apply the logic of the classical
inverse probability weighting approach and assign appropriate weights to treated and control
observations using the following scheme:

𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡
1/𝑝𝑝𝑖𝑖,𝑡𝑡 if 𝑖𝑖 is a treated firm in year 𝑡𝑡
𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊ℎ𝑡𝑡𝑖𝑖,𝑡𝑡 = � 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡
1/(1 − 𝑝𝑝𝑖𝑖,𝑡𝑡 ) if 𝑖𝑖 is a control firm in year 𝑡𝑡
We re-estimate equation (3), the baseline model, using a weighted least square regression with the
weights as defined above. The results are reported in Panel B of Table 7. We find that the effect
of EDGAR is still negative and statistically significant across all specifications. More importantly,
the magnitude of the effect after implementing inverse probability weighting is very similar to
that of the baseline model. Further, Figure 5 shows the dynamic effects of EDGAR on investment-
Q sensitivity, adjusted with the inverse probability weights. The figure indicates that the parallel
trends assumption is not violated and that the EDGAR effect is robust and persistent over time,
11
The density plot for 1996 is not shown because by that point in time every firm is expected to be treated
with probability 1.
23

similar to evidence presented in Figure 2. In sum, the results adjusted with inverse probability
weights strongly suggest that treatment effect heterogeneity across waves is not a cause for
concern.
4 Economic Mechanisms
In this section, we conduct several additional tests to validate our inferences and to identify
the economic mechanisms driving a reduction in RPE post-EDGAR.
4.1 Disentangling FPE and Real Efficiency RPE
Notwithstanding the evidence in Gao and Huang (2020), EDGAR may have decreased
overall price informativeness, which in turn led to lower market efficiency. If that is the case, then
our findings of reduced investment-Q sensitivity could be driven by fewer investment opportunities
post-EDGAR. In other words, flexibly controlling for measures of FPE should attenuate our
estimates (Bond, Edmans, and Goldstein 2012). Following prior literature (e.g., Chen et al. 2006),
we use the probability of informed trading (PIN; Easley, Kiefer, and O’Hara 1997) and price non-
synchronicity as measures of FPE (see Appendix A for variable definitions). We re-estimate
equation (3) controlling for these measures as well as their interactions with the Posti,t variable,
and report the results in Table 8. We would expect the coefficient on Q × Post to be attenuated
if the reduction in investment-Q sensitivity is partly due to a reduction in FPE.
Because of missing values, we tabulate two columns for each measure of FPE. For each
measure, the first shows the baseline specification, but with the reduced sample. The second shows
the result controlling for market quality. The coefficient on investment-Q sensitivity remains
negative and statistically significant. Further, within each pair of columns, the estimates are very
24

similar, indicating that the changes to the FPE (i.e. total information in prices) following EDGAR
adoption does not explain the reduction in RPE.
4.2 Cross-Sectional Tests – Trading Costs
In this subsection, we perform cross-sectional tests to examine how trading frictions affect
investor ability to incorporate information from corporate filings into prices. The introduction of
EDGAR reduces the cost of acquire public information, making the marginal cost of trading on
such information decrease. However, we hypothesize that for stocks with high trading costs, the
marginal cost of trading on public information may still be higher than the marginal benefits
despite a reduction in public information acquisition cost (Subrahmanyam 1998). Therefore, high
trading costs could prevent public information available on EDGAR to be efficiently impounded
into prices. Under this logic, we predict that the reduction in investment-Q sensitivity post-
EDGAR is mainly driven by firms with low trading costs in the pre-period.
To test this prediction, we consider three measures of trading costs: Amihud’s (2002)
illiquidity, trading volume, and bid-ask spreads. The higher the values of the measures, the higher
the trading cost, with only trading volume being the opposite. We compute the average level of
trading costs in the pre-period for each firm and form quartile ranks. Interacting Q × Post with
the quartile rank of each of above measures, we find evidence consistent with our prediction. As
shown in Table 9, the coefficients on the triple interaction are positive, negative, and positive for
illiquidity, trading volume, and bid-ask spread, respectively. These coefficients are statistically
significant with the exception of bid-ask spread which is barely significant. Thus, these results
collectively suggest that our main findings are driven by firms with low trading frictions, and that
market liquidity is important for publicly available information to be better incorporated into
prices.
25

4.3 Cross-Sectional Tests – Idiosyncratic vs. Systematic Information
The central idea behind the crowding-out channel of RPE is that easing access to corporate
filings causes prices to reflect information that managers already know more than information
they wish to learn, rendering prices less useful from managers’ point of view. However, testing
this mechanism directly requires measures of information managers know and would like to know,
both of which are likely unobservable. To investigate this mechanism indirectly, we hypothesize
that information that managers know is likely idiosyncratic information about their firms, whereas
information that they wish to learn is likely systematic information about the industry and the
financial market as a whole. If this is the case, then we predict that our results are driven mainly
by firms that are more “systematic” (i.e. more influenced by industry factors) in the pre-period
as they should be affected the most by a shock that increases the level of idiosyncratic information.
In contrast, managers of firms that are more “idiosyncratic” (i.e. less influenced by industry
factors) in the pre-period should already rely less on prices to guide their decisions. Thus, EDGAR
is unlikely to have a significant effect on idiosyncratic firms.
We perform three cross-sectional tests to investigate this mechanism using three proxies
of whether a firm tends to be more “systematic” or “idiosyncratic” in the pre-period. Specifically,
we interact Q × Post with the quartile ranks of each of these proxies. The results are presented
in Table 10. The first proxy is industry concentration, the Herfindahl-Hirschman Index (HHI)
based on firm sales in the same 3-digit SIC codes. The intuition is that firms in low concentration
industries are more likely to be influenced by industry characteristics (e.g., they tend to be price
takers). Therefore, their exposure is more likely systematic and they would be affected the most
by EDGAR. Consistent with this prediction, the coefficient of the triple interaction term in column
(1) is positive and statistically significant.
26

The second proxy is industry beta, estimated by regressing Fama-French 49 monthly
industry returns on monthly market returns. We consider firms in industries with high industry
betas systematic firms, as their returns are largely influenced by industry returns. Thus, we expect
a more pronounced drop in investment-Q sensitivity for firms in high-beta industries. Consistent
with our prediction, the coefficient on the triple interaction term shown in column (2) is negative
and significant.
The third proxy is whether a firm is an old-economy firm or new-economy firm, as captured
by firm age. The intuition is that old-economy firms have carved out a niche for themselves,
making them less susceptible to changes at the industry level. In other words, we consider old-
economy firms idiosyncratic firms and predict a smaller EDGAR effect on investment-Q sensitivity
for these firms. Column (3) of Table 10 shows that the triple interaction term is positive and
significant, consistent with our prediction.
4.4 Amplification channel of analysts
Gao and Huang (2020) find that EDGAR induces more information production activities
from equity analysts. However, it is unclear whether the information produced by analysts is
useful for managers. They find that analyst forecasts are more accurate post-EDGAR, which
suggests that analysts are better at incorporating firm idiosyncratic information into their
forecasts. In other words, by encouraging pricing based on information from EDGAR filings,
analysts may amplify the EDGAR effect, further crowding out information that managers might
wish to learn. Thus, we predict that firms with a higher number of analysts following them in the
pre-period experience a stronger decline in investment-Q sensitivity.
To test this prediction, we interact Q × Post with the quartile ranks of the average number
of analysts following the firm in the pre-period. Column (4) of Table 10 reports the results. We
27

find that the coefficient on the triple interaction term is negative and statistically significant,
supporting the analyst amplification channel. In other words, the increased information produced
by analysts following the implementation of EDGAR is likely idiosyncratic information based on
corporate filings that managers already possess. Consequently, stock prices of firms with a high
level of analyst following in the pre-period become less informative for managerial investment
decisions.
5 Conclusion
The real effect of financial markets depends on whether prices reveal information that is
useful for managers to take value-maximizing actions, a notion Bond et al. (2012) term Revelatory
Price Efficiency (RPE). In this paper, we study the effect of the implementation of EDGAR, a
level the playing field regulation by the SEC that significantly reduces the cost to acquire public
information, on the RPE aspect of price informativeness. Despite a positive effect on overall price
efficiency, we find robust evidence indicating that the adoption of EDGAR actually decreases
RPE. In particular, investment-Q sensitivity falls by roughly 35.2% following EDGAR adoption.
The evidence is consistent with a crowding-out channel in which making public information more
readily available causes prices to reflect information already known to managers rather than
information they wish to learn.
These findings contribute to our understanding of the effects of modern advancement in
financial technology in capital markets and are relevant for regulators drafting policies aiming to
improve market efficiency. We show that such improvement could be at the expense of RPE,
which hurts managers’ ability to learn from prices to make efficient real decisions. Given this
discrepancy between the two notions of price efficiency, future research should investigate whether
the crowding-out effect applies to other level the playing field regulations or financial technology
28

innovations. Our findings also call for more research enhancing our understanding of how investors
allocate their information acquisition efforts when there are multiple sources of costly information,
as well as the consequences of their allocation.
29

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33

Figure 1: Fraction of Firms on EGDGAR Over Time
This figure plots the cumulative percentage of firms with a 10-K filing on EDGAR during the
sample period from 1989 to 2000.
34

Figure 2: The Dynamic Effects of EDGAR on Investment-Q Sensitivity
This figure shows coefficient estimates and 95% confidence intervals for the event study regressions
estimating the effect of EDGAR on Investment-Q sensitivity. Treatment happens at t = 0, and
the year event t= -1 serves as the benchmark.
35

Figure 3: Heterogeneity in Treatment Effects Based on EDGAR Waves
This figure shows coefficient estimates and 95% confidence intervals for regressions estimating the
heterogenous effects of EDGAR on Investment-Q sensitivity based on EDGAR waves as reported
in Table 5A. Panels A, B, C, and D corresponds to specifications (1), (2), (3) and (4) of Table
5A, respectively.
Panel A. Specification (1) Panel B. Specification (2)
Panel C. Specification (3) Panel D. Specification (4)
36

Figure 4: Distributions of Treatment Probabilities for Treated and Control Firms
This figure plots the distributions of the probability of being treated in 1993, 1994, or 1995 for
treated and control firms. The probabilities are calculated according to a procedure described in
section 3.4.
Panel A. Density of the Probability Panel B. Density of the Probability

of Being Treated in 1993 of Being Treated in 1994
Panel C. Density of the Probability

of Being Treated in 1995
37

Figure 5: The Dynamic Effects of EDGAR on Investment-Q Sensitivity – Adjusted with Inverse
Probability Weights
This figure repeats to procedure in Figure 2 with a weighted regression using inverse probability
weights. The weights are based on the estimated treatment probabilities from the procedure
described in section 3.4.
38

Table 1: Summary Statistics
This table provides the descriptive statistics of variables used in our main analyses. Observations
are at the firm-year level. See Appendix A for variable definitions.
Mean SD P25 P50 P75
Invt+1 0.315 0.363 0.122 0.211 0.371
Q 1.764 1.300 1.058 1.327 1.940
Post 0.419 0.493 0.000 0.000 1.000
CFO 0.079 0.103 0.047 0.086 0.130
Size 5.589 1.921 4.123 5.351 6.893
BM 0.710 0.571 0.343 0.567 0.884
Leverage 0.494 0.212 0.331 0.513 0.653
ROA 0.033 0.103 0.010 0.042 0.080
Firm Age 16.271 11.902 7.000 13.000 24.000
PIN 0.234 0.116 0.153 0.208 0.288
Price Non-Synchronicity -0.067 0.071 -0.095 -0.044 -0.015
Illiquidity 0.693 1.799 0.006 0.051 0.414
Log Trading Volume 10.646 1.819 9.409 10.719 11.917
Bid-Ask Spread 3.454 2.907 1.451 2.575 4.445
HHI 0.201 0.157 0.092 0.155 0.257
Number of Analysts 3.479 4.799 0.000 2.000 5.000
Industry Beta 1.015 0.342 0.840 1.033 1.221
39

Table 2: EDGAR Effect on Investment-Q Sensitivity
This table reports coefficient estimates from staggered difference-in-differences regressions
estimating the effect of EDGAR on investment-Q sensitivity. In all specifications, the dependent
variable is future investment, Invt+1. The main independent variable of interest is Q × Post, where
Q is Tobin’s Q and Post is an indicator equal to 1 starting from the event-year, and 0 otherwise.
Control variables include Size, BM, Leverage, ROA, and Firm Age. Appendix A contains detailed
definitions of all variables used in the regressions. Robust standard errors are clustered by firm
and presented in parentheses. ***, **, and * denote results significant at the 1%, 5%, and 10%
levels.
Invt+1
(1) (2) (3) (4)
Q × Post -0.0469*** -0.0432*** -0.0351*** -0.0345***
(0.0058) (0.0056) (0.0061) (0.0054)
Q 0.1159*** 0.1130*** 0.1048*** 0.0939***
(0.0050) (0.0054) (0.0061) (0.0059)
Post 0.0008 0.0901*** 0.0853*** 0.0707***
(0.0124) (0.0119) (0.0127) (0.0114)
Size -0.0405***
(0.0066)
BM -0.0929***
(0.0072)
Leverage -0.3621***
(0.0300)
ROA 0.4046***
(0.0421)
Firm Age -0.0053
(0.0033)
Year FE Yes Yes No Yes
Firm FE No Yes Yes Yes
Industry-Year FE No No Yes No
Adj. R2 0.129 0.376 0.366 0.400
Obs. 33,491 33,491 33,491 33,435
40

Table 3: EDGAR Effect on Investment-Q Sensitivity – Controlling for
Investment-Cash Flow Sensitivity
This table repeats the analysis in Table 2 while controlling for investment-cash flow sensitivity,
CFO and CFO × Post. In all specifications, the dependent variable is future investment, Invt+1.
The main independent variable of interest is Q × Post, where Q is Tobin’s Q and Post is an
indicator equal to 1 starting from the event-year, and 0 otherwise. Control variables include Size,
BM, Leverage, ROA, and Firm Age. Appendix A contains detailed definitions of all variables used
in the regressions. Robust standard errors are clustered by firm and presented in parentheses. ***,
**, and * denote results significant at the 1%, 5%, and 10% levels.
Invt+1
(1) (2) (3) (4)
Q × Post -0.0444*** -0.0402*** -0.0318*** -0.0323***
(0.0060) (0.0059) (0.0064) (0.0057)
Q 0.1142*** 0.1022*** 0.0954*** 0.0926***
(0.0050) (0.0054) (0.0060) (0.0059)
CFO × Post -0.1713*** -0.1503** -0.1285* -0.1549**
(0.0665) (0.0738) (0.0734) (0.0730)
CFO 0.1330*** 0.5314*** 0.4782*** -0.3294***
(0.0434) (0.0529) (0.0540) (0.0876)
Post 0.0075 0.0936*** 0.0878*** 0.0789***
(0.0122) (0.0119) (0.0126) (0.0115)
Controls No No No Yes
Adj. R2 0.132 0.388 0.377 0.405
Obs. 33,038 33,038 33,038 33,008
41

Table 4: EDGAR Effect on Investment-Q Sensitivity – Controlling for the Size Effect
This table repeats the analysis in Table 3 while controlling for the size effect, Size and Size ×
Post. In all specifications, the dependent variable is future investment, Invt+1. The main
independent variable of interest is Q × Post, where Q is Tobin’s Q and Post is an indicator equal
to 1 starting from the event-year, and 0 otherwise. Control variables include BM, Leverage, ROA,
and Firm Age. Appendix A contains detailed definitions of all variables used in the regressions.
Robust standard errors are clustered by firm and presented in parentheses. ***, **, and * denote
results significant at the 1%, 5%, and 10% levels.
Invt+1
(1) (2) (3) (4)
Q × Post -0.0432*** -0.0418*** -0.0341*** -0.0326***
(0.0063) (0.0061) (0.0067) (0.0059)
Q 0.1247*** 0.0994*** 0.0928*** 0.0927***
(0.0053) (0.0061) (0.0067) (0.0059)
CFO × Post -0.1671** -0.1600** -0.1416* -0.1565**
(0.0671) (0.0746) (0.0738) (0.0738)
CFO 0.2204*** 0.5220*** 0.4695*** -0.3283***
(0.0447) (0.0533) (0.0539) (0.0877)
Size × Post 0.0045** 0.0015 0.0027 0.0005
(0.0023) (0.0023) (0.0028) (0.0023)
Size -0.0297*** 0.0089* 0.0095 -0.0408***
(0.0018) (0.0053) (0.0059) (0.0068)
Post 0.0084 0.0883*** 0.0771*** 0.0764***
(0.0158) (0.0154) (0.0177) (0.0156)
Adj. R2 0.150 0.388 0.377 0.405
Obs. 33,038 33,038 33,038 33,008
42

Table 5: EDGAR Effect on Investment-Q Sensitivity – Experiment Robustness
This table repeats specification (4) in Table 4 with varying sample restriction. In columns (1),
(2), (3), and (4), the sample is restricted to including only observations in the event window of [-
1,1], [-2,2], [-3,3], and [-4,4] respectively. In column (5), the sample includes only observations with
fiscal years before 1998. In column (6), firms that did not join EDGAR by the end of the adoption
period in 1996 are excluded from the sample. In all specifications, the dependent variable is future
investment, Invt+1. The main independent variable of interest is Q × Post, where Q is Tobin’s Q
and Post is an indicator equal to 1 starting from the event-year, and 0 otherwise. Only the relevant
coefficients are tabulated for parsimony. Control variables include BM, Leverage, ROA, and Firm
Age. Appendix A contains detailed definitions of all variables used in the regressions. Robust
standard errors are clustered by firm and presented in parentheses. ***, **, and * denote results
significant at the 1%, 5%, and 10% levels.
Invt+1
(1) (2) (3) (4) (5) (6)
Q × Post -0.0339*** -0.0225*** -0.0190*** -0.0224*** -0.0293*** -0.0329***
(0.0096) (0.0085) (0.0070) (0.0063) (0.0071) (0.0060)
Only firms
Only fiscal that join
Sample [-1;1] [-2;2] [-3;3] [-4;4]
year < 1998 EDGAR
by 1996
Controls Yes Yes Yes Yes Yes Yes

Year FE Yes Yes Yes Yes Yes Yes
Firm FE Yes Yes Yes Yes Yes Yes
Adj. R2 0.468 0.439 0.434 0.416 0.427 0.406
Obs. 8,869 14,719 20,346 25,380 26,437 32,133
43

Table 6: EDGAR Effect on Investment-Q Sensitivity – Alternative Investment Measures
This table repeats the analysis in Table 4 with alternative definitions of future investment. Panel
A shows the results in which Invt+1 is capital expenditures in year t+1 scaled by total assets in
year t. Panel B shows the results in which Invt+1 is the sum of capital expenditures and R&D
expenses in year t+1, scaled by fixed assets in year t. In both panels, the main independent
variable of interest is Q × Post, where Q is Tobin’s Q and Post is an indicator equal to 1 starting
from the event-year, and 0 otherwise. Only the relevant coefficients are tabulated for parsimony.
Control variables include BM, Leverage, ROA, and Firm Age. Appendix A contains detailed
levels.
Panel A. Scaling by assets
Invt+1
(1) (2) (3) (4)
Q × Post -0.0045*** -0.0045*** -0.0032*** -0.0026***
(0.0011) (0.0010) (0.0011) (0.0009)
Adj. R2 0.076 0.576 0.580 0.588
Obs. 33,038 33,038 33,038 33,008
44

Panel B. Including R&D expenses
Invt+1
(1) (2) (3) (4)
Q × Post -0.0782*** -0.0621*** -0.0646*** -0.0447**
(0.0249) (0.0200) (0.0206) (0.0196)
Adj. R2 0.240 0.698 0.682 0.704
Obs. 33,038 33,038 33,038 33,008
45

Table 7: EDGAR Effect on Investment-Q Sensitivity – Inverse Probability Weighting
Panel A. Heterogeneous Treatment Effects Based on EDGAR Waves

Panel A of this table shows the heterogenous treatment effects of EDGAR based on EDGAR
waves. The specifications are similar to those in Table 4, with the exception that Post is replaced
by four indicators corresponding to four different EDGAR waves: Post1993 Wave, Post1994 Wave, Post1995
Wave
, and Post1996 Wave. For a given firm, Post1993 Wave is an indicator equal to 1 starting in 1993 if the
firm joins EDGAR in 1993, and 0 otherwise. Post1994 Wave, Post1995 Wave, and Post1996 Wave are defined
similarly. In all specifications, the dependent variable is future investment, Invt+1. The independent
variables of interest are Q × Post1993 Wave, Q × Post1994 Wave, Q × Post1995 Wave, and Q × Post1996 Wave,
where Q is Tobin’s Q. Only the relevant coefficients are tabulated for parsimony. Control variables
include BM, Leverage, ROA, and Firm Age. Appendix A contains definitions of all variables used.
Robust standard errors are clustered by firm and presented in parentheses. ***, **, and * denote
results significant at the 1%, 5%, and 10% levels.
Invt+1
(1) (2) (3) (4)
Q × Post1993 Wave -0.0683*** -0.0456*** -0.0352*** -0.0367***
(0.0087) (0.0094) (0.0104) (0.0091)
Q × Post1994Wave -0.0394*** -0.0280*** -0.0201* -0.0216**
(0.0106) (0.0103) (0.0113) (0.0103)
Q × Post1995 Wave -0.0568*** -0.0385*** -0.0368*** -0.0346***
(0.0082) (0.0084) (0.0093) (0.0082)
Q × Post1996 Wave -0.0298* -0.0338* -0.0218 -0.0246
(0.0166) (0.0173) (0.0179) (0.0165)
p-value (H0: 𝛽𝛽1 = 𝛽𝛽2 = 𝛽𝛽3 = 𝛽𝛽4 ) 0.042 0.589 0.564 0.608
Adj. R2 0.153 0.389 0.378 0.405
Obs. 33,038 33,038 33,038 33,008
46

Panel B. Main Results – Inverse Probability Weighting
Panel B of this table repeats the analysis in Table 4 using a weighted regression with inverse
probability weights. The weights are based on the estimated treatment probabilities from a logistic
regression based on firm characteristics as described in section XYZ. The main independent
variable of interest is Q × Post, where Q is Tobin’s Q and Post is an indicator equal to 1 starting
from the event-year, and 0 otherwise. Only the relevant coefficients are tabulated for parsimony.
Control variables include BM, Leverage, ROA, and Firm Age. Appendix A contains detailed
levels.
Invt+1
(1) (2) (3) (4)
Q × Post -0.0389*** -0.0389*** -0.0299*** -0.0306***
(0.0088) (0.0062) (0.0071) (0.0061)
Adj. R2 0.232 0.489 0.485 0.502
Obs. 33,038 33,038 33,038 33,008
47

Table 8: Disentangling FPE and RPE
This table presents results that address the alternative explanation regarding total information
(the FPE channel) by repeating specification (4) of Table 4, controlling for FPE proxies (quartile
ranks of PIN, Price Non-Synchronicity, and their interactions with Post). In all specifications, the
dependent variable is future investment, Invt+1. The main independent variable of interest is Q ×
Post, where Q is Tobin’s Q and Post is an indicator equal to 1 starting from the event-year, and
0 otherwise. Because each FPE measure has missing data, we include side-by-side estimates from
specifications with and without interacted market quality control variables to allow for a fixed-
sample comparison of our Q × Post estimates. Only the relevant coefficients are tabulated for
parsimony. Control variables include BM, Leverage, ROA, and Firm Age. Appendix A contains
detailed definitions of all variables used in the regressions. Robust standard errors are clustered
by firm and presented in parentheses. ***, **, and * denote results significant at the 1%, 5%, and
10% levels.
Invt+1
(1) (2) (3) (4)
Q × Post -0.0328*** -0.0320*** -0.0310*** -0.0291***
(0.0060) (0.0060) (0.0063) (0.0063)
PIN Quartiles -0.0087**
(0.0035)
PIN Quartiles × Post 0.0050
(0.0047)
Price Non-Synchronicity Quartiles -0.0153***
(0.0033)
Price Non-Synchronicity Quartiles × Post 0.0180***
(0.0041)
Controls Yes Yes Yes Yes

Year FE Yes Yes Yes Yes
Firm FE Yes Yes Yes Yes
Adj. R2 0.405 0.405 0.410 0.411
Obs. 32,889 32,889 30,381 30,381
48

Table 9: Cross-Sectional Tests – Trading Costs
This table reports cross-sectional effects of pre-period trading costs on the EDGAR effect on
investment-Q sensitivity. In all specifications, the dependent variable is future investment, Invt+1.
The main independent variables of interest are Q × Post × Pre Illiquidity Quartiles, Q × Post ×
Pre Trading Volume Quartiles, and Q × Post × Pre Bid-Ask Spread Quartiles, where Q is Tobin’s
Q and Post is an indicator equal to 1 starting from the event-year, and 0 otherwise, Pre Illiquidity
Quartiles is the quartile ranks of the average Illiquidity in the pre-period, Pre Trading Volume
Quartiles is the quartile ranks of the average Log Trading Volume in the pre-period, and Pre Bid-
Ask Spread Quartiles is the quartile ranks of the average Bid-Ask Spread in the pre-period. Only
the relevant coefficients are tabulated for parsimony. All specifications include CFO, CFO × Post,
Size, and Size × Post. Other control variables include BM, Leverage, ROA, and Firm Age.
Appendix A contains detailed definitions of all variables used in the regressions. Robust standard
errors are clustered by firm and presented in parentheses. ***, **, and * denote results significant
at the 1%, 5%, and 10% levels.
Invt+1
(1) (2) (3)
Q × Post × Pre Illiquidity Quartiles 0.0118**
(0.0056)
Q × Post × Pre Trading Volume Quartiles -0.0216***
(0.0052)
Q × Post × Pre Bid-Ask Spread Quartiles 0.0078
(0.0053)
Controls Yes Yes Yes

Year FE Yes Yes Yes
Firm FE Yes Yes Yes
Adj. R2 0.408 0.402 0.403
Obs. 28,612 30,072 29,308
49

Table 10: Cross-Sectional Tests: Idiosyncratic versus Systematic Components of Price
This table reports cross-sectional results on the differential feedback effect from the idiosyncratic
and the systematic components of price. In all specifications, the dependent variable is future
investment, Invt+1. The main independent variables of interest are the triple interaction terms
with Pre HHI Quartiles, Pre Number of Analysts Quartiles, Pre Industry Beta Quartiles, and Pre Age
Quartiles. These are quartile ranks of the average HHI index, the number of analysts following,
the industry beta, and firm age, in the pre-period, respectively. Only the relevant coefficients are
tabulated for parsimony. All specifications include CFO, CFO × Post, Size, and Size × Post.
Other control variables include BM, Leverage, ROA, and Firm Age. Appendix A contains detailed
levels.
Invt+1
(1) (2) (3) (4)
Q × Post × Pre HHI Quartiles 0.0112**
(0.0048)
Q × Post × Pre Industry Beta Quartiles -0.0175***
(0.0047)
Q × Post × Pre Age Quartiles 0.0226***
(0.0047)
Q × Post × Pre Number of Analysts Quartiles -0.0102**
(0.0045)
Controls Yes Yes Yes Yes

Year FE Yes Yes Yes Yes
Firm FE Yes Yes Yes Yes
Adj. R2 0.398 0.399 0.401 0.399
Obs. 32,451 32,451 32,451 32,451
50

Appendix A: Variable Descriptions
Main Variables:
Abbreviation Description
Investment level in year t+1, defined as capital expenditures in year t+1

Invt+1
scaled by total fixed assets in year t.
Tobin’s Q in year t, defined as the market value of equity plus book

Q
value of debt scaled by total assets.
Indicator equal to 1 starting from the firm’s event-year. A firm event-

Post year is defined as the first fiscal year in which the firm’s Tobin’s Q is
affected by EDGAR.
Cash flow from operations in year t, defined as earnings before

CFO extraordinary items plus depreciation and amortization, scaled by total
assets.
Firm size in year t, defined as the natural log of one plus the firm’s
Size
market capitalization.
Control Variables:
Book to market ratio in year t, defined as book value of equity, divided

BM
by market value of equity.
Leverage Leverage in year t, defined as total liabilities divided by total assets.
ROA Return on assets in year t, defined as net income divided by total assets.
Firm Age Firm age in years as of year t.
51

Other Variables:
Probability of informed trading (Easley et al. 1997); obtained from

PIN
Brown et al. (2004).
The natural log of one minus the R2 of a regression of firm-level daily

Price Non-Synchronicity
equity returns on CRSP’s equally weighted market returns.
Firm illiquidity at the end of fiscal year t, defined, following Amihud

Illiquidity (2002) as the average of the ratio of daily unsigned stock returns scaled
by dollar trading volume multiplied by 106.
Log Trading Volume The log of the average daily trading volume of the firm in fiscal year t.
Average daily bid-ask spread in year t, where daily bid-ask spreads are
Bid-Ask Spread
calculated as ((ask - bid)/((ask + bid)/2))×100.
Industry concentration in year t, defined as the Herfindahl-Hirschman

HHI
Index based on firm sales in the same 3-digit SIC codes.
Analyst coverage in year t, defined as the number of analysts following

Number of Analysts
the firm.
Industry beta, estimated by regressing Fama French 49 monthly

Industry Beta industry returns on monthly market returns using the previous 24
months of data with at least 20 non-missing data.
52

Appendix B: Additional Tables
Table B1. Multinomial Logistic Regression of EDGAR Wave Assignment

This table show the results from the multinomial logistic regression used to predict the probability
of EDGAR wave assignments. The dependent variable of interest is Wave, a categorical variable
equal to 1993 if a firm joins EDGAR in 1993, 1994 if it joins EDGAR in 1994, 1995 if it joins
EDGAR in 1995 and 1996 if it joins EDGAR in 1996. The dependent variables are firm
characteristics in 1992 such as Q, Size, CFO, BM, Leverage, ROA, and Firm Age. Standard errors
are presented in parentheses. ***, **, and * denote results significant at the 1%, 5%, and 10%
levels.
Wave
1993 1994 1995 1996
Q . 0.1700** 0.4079*** 0.2326***
(0.0682) (0.0686) (0.0688)
Size . -0.4717*** -1.1172*** -0.2655***
(0.0397) (0.0548) (0.0487)
CFO . 1.3898 -0.0717 -2.7820**
(1.2207) (1.2825) (1.3761)
BM . -0.3366*** -0.6995*** -0.2479*
(0.1172) (0.1246) (0.1349)
Leverage . -1.5895*** -2.7937*** -2.0016***
(0.2840) (0.3049) (0.3256)
ROA . -1.2802 0.4924 1.7914
(1.1532) (1.2442) (1.3455)
Firm Age . -0.0113** -0.0261*** -0.1781***
(0.0050) (0.0064) (0.0106)
Pseudo R2 0.21
Obs. 3,275
53

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More is Less: Publicizing Information and

Andrew Bird Stephen A. Karolyi

Thomas G. Ruchti Phong Truong

JEL Classification: G10, G30, M41

Electronic copy available at: https://ssrn.com/abstract=3641837

Revelatory Price Efficiency (RPE).

Electronic copy available at: https://ssrn.com/abstract=3641837

role of prices in promoting efficient real decisions.

To answer this question, we investigate the implications of the staggered implementation

finding: investment-Q sensitivity decreases significantly following the introduction of EDGAR.

more capital and better exploit investment opportunities.

Electronic copy available at: https://ssrn.com/abstract=3641837

Bond and Goldstein 2015).

from price, resulting in higher investment-Q sensitivity.

Electronic copy available at: https://ssrn.com/abstract=3641837

different points in time in accordance with the EDGAR rollout.

Using a staggered difference-in-differences design, we find that investment-Q sensitivity

leading firms to be less responsive to investment opportunities in general.

Electronic copy available at: https://ssrn.com/abstract=3641837

predicted probabilities to be assigned to a particular EDGAR wave from a multinomial logistic

the post-EDGAR indicator (Chen, Goldstein, and Jiang 2006).

Electronic copy available at: https://ssrn.com/abstract=3641837

incorporated into prices.

a niche over time, depending on a more idiosyncratic technology or business model.

information analysts produce post-EDGAR appears to be due to idiosyncratic information

Electronic copy available at: https://ssrn.com/abstract=3641837

to IT-based innovation and policy in capital markets.

An important contribution of our paper is to provide well-identified evidence of the effect

of information acquisition costs by exploiting a quasi-natural experiment that generates variation

Electronic copy available at: https://ssrn.com/abstract=3641837

individual confounding events. Moreover, in contrast to recent work, we focus on variation in

Electronic copy available at: https://ssrn.com/abstract=3641837

systematic information that the manager would like to learn.

theoretically distinct constructs.

2 EDGAR Implementation and Data

2.1 EDGAR Implementation

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program on July 14, 1992 (Budge 1993). 3

of three additional wave-years, 1994–1996. 5

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potential hardship exemptions.

2.2 Data and Sample Selection

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equity is less than $10 million.

to zero after 1997.

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Detailed variable descriptions are available in Appendix A.

Foucault and Frésard 2014; Jayaraman and Wu 2019).

3 Empirical Strategy and Results

3.1 Baseline Specification and Results

To test the effect of EDGAR adoption on investment-Q sensitivity, we use a staggered

Our main specification is a firm-level regression in which we augment the standard

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in Appendix A. In some specifications, we replace ut with uindustry×t to control for industry-specific

Electronic copy available at: https://ssrn.com/abstract=3641837

implementation of EDGAR leads to a reduction in investment-Q sensitivity by roughly 36.7%.

Electronic copy available at: https://ssrn.com/abstract=3641837

responsive to investment opportunities following EDGAR adoption. To address this concern, we

assets), as well as its interaction with Posti,t, as shown in equation (2):

+ 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑖𝑖,𝑡𝑡 + 𝑣𝑣𝑖𝑖 + 𝑢𝑢𝑡𝑡 + ε𝑖𝑖,𝑡𝑡 (2).

of 𝛽𝛽1 would not be attenuated.

Electronic copy available at: https://ssrn.com/abstract=3641837

notion that RPE decreases, even though FPE increases.